Japan returns to trade deficit in May as yen strengthens

A truck driver moves past piled containers at a port in Tokyo, Thursday, Feb. 18, 2016. Japan's trade balance returned to deficit in January, with a shortfall of 646 billion yen ($5.65 billion) as exports fell 13 percent from the year before, led by an 18 percent plunge in the value of shipments to China.Photo/Shuji Kajiyama)TOKYO: Japan fell into a trade deficit in May, the first since January, the finance ministry said Monday, as renewed yen strength pressured exports.

Japanese exports fell for all major regions, including the nation's biggest trading partner China, as concerns linger over a slowdown in the largest Asian economy as well as other emerging markets.

The government of Prime Minister Shinzo Abe has actively attempted to talk down the yen's strength, with ministers repeatedly suggesting that Tokyo could step into the market to weaken the currency, as they rush to safeguard the fragile economy ahead of a July parliamentary election.

A rising yen dents Japanese exports by making the country's products more expensive in overseas markets and thus less competitive.

The currency, often seen as a safe haven, has broadly gained in recent months, partially on fears over the state of the global economy and more recently on concerns over a possible British exit from the European Union in a referendum this week.

Abe was also preparing to launch further stimulus, as his controversial big-spending and easy money policy blitz, known as "Abenomics", has failed to pull Japan out of its prolonged economic malaise more than three years after the programmes began.

The value of steel shipments dropped 24.1 per cent, while electronic parts such as semiconductors shrank 20.0 per cent, the ministry said.

China-bound exports fell 14.9 per cent, led by a dip in optical equipment exports such as lenses, while imports fell 9.7 per cent, leaving a trade deficit of 401.1 billion yen, according to the ministry.

Major Japanese brokerage SMBC Nikko Securities said the trend of moderate recovery in exports remained intact, despite May's decline, thanks largely to a solid US economy.

IT product inventories in the US market have started to fall, leading to inventory adjustment in Taiwan and elsewhere in Asia, said Junichi Makino, chief economist at the brokerage.

"The silicon cycle is expected to bottom out soon, which should lift Japan's electronics exports," he said.

The general state of the US economy should also boost Japanese machinery exports, he said, while healthy auto sales there should also support Japan's vehicle exports.

Japanese exports to the US fell 10.7 per cent while imports also fell 8.5 per cent.

Japanese imports, meanwhile, fell 13.8 per cent, the 17th straight monthly drop, but the speed of the fall was slower than the 23.3 per cent seen in April.